A legal challenge against Debenhams’ company voluntary arrangement, which is being funded by Mike Ashley, has begun at the High Court.
Although Sports Direct International plc and Sportsdirect.com Retail Ltd previously withdrew as parties to the case, which involves the restructuring of Debenhams through a CVA, the court was told that Ashley has agreed to bear any costs award that could result in Debenhams’ favour if the challenge is ultimately unsuccessful.
The challenge is being pursued by the Combined Property Control Group (CPC), the landlord of a number of Debenhams properties, which is opposed to the CVA that paved the way for rent reductions and store closures.
Debenhams’ CVA proposals received support from 94% of creditors who voted, including more than 80% of landlords. The minimum vote required was 75%.
However, Daniel Bayfield QC, representing CPC, argued yesterday that the Debenhams CVA is void under the Insolvency Act, and that it “unfairly prejudices” the interests of landlords.
Bayfield said that the vote figures should be treated with “great caution”, claiming that many of those who supported the CVA were not affected by its terms and expected to be receive all they were entitled to, at the expense of lower priority landlords.
However, Tom Smith QC, representing Debenhams, claimed that his client considers that Ashley and Sports Direct continue to fund the case in order to “drive its principal competitor out of business”.
The case is being heard over four days, after which Mr Justice Norris is expected to reserve judgment in order to give a written decision at a later date.
See also: Avoiding a £1 dilapidations value in CVAs
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